ACell (ACLL) intends to raise $75 million from the sale of its common stock, according to an amended registration statement.

The company develops and sells wound treatment systems for various tissue care applications.

ACLL was growing revenue sharply but has since felt the negative effects from the Covid19 pandemic.


To listen to an audio version of this report, click the Play button on the graphic below:


Columbia, Maryland-based ACell was founded to develop proprietary porcine urinary bladder matrix technologies to assist in the reinforcement of soft tissue that has been damaged.

Management is headed by Mr. Patrick McBrayer, who has been with the firm since 2016 and was previously president and Chief Executive Officer of AxioMed Spine until the company's acquisition in 2014.

Below is a brief overview video of abdominal wall repair using the firm's technologies:

Source: AEGIS Communications

The company’s primary offerings include:

  • MicroMatrix
  • Cytal
  • Gentrix
  • ABRA Abdominal

ACell has received at least $42 million from investors.

Since the firm's commercial launch in 2009, it has sold more than 500,000 units of its urinary bladder matrix products in the U.S.

ACell also has marketing approval in Canada and Saudi Arabia and is pursuing approvals in China, South Korea and the EU.

The company sells its products through a 160-strong direct sales force that sells to hospital operating rooms and intensive care units.

ACell also sells through group purchasing organizations, integrated delivery networks and to the federal government.Total customer count in 2019 was 1,900 customers.

Selling, G&A expenses as a percentage of total revenue have been trending upward as revenues have increased.

The Selling, G&A efficiency rate, defined as how many dollars of additional new revenue are generated by each dollar of Selling, G&A spend, was 0.0x in the most recent reporting period.

According to a 2018 market research report by Grand View Research, the U.S. market for advanced wound care was $2.46 billion in 2018.

This represents a forecast 4.2% from 2018 to 2026.

The main drivers for this expected growth are a growing incidence of chronic wounds, increasing demand for shorter hospital stays and more surgeries in the U.S.

Also, The chart below shows the historical and forecast U.S. advanced wound care market size:


Major competitive or other industry participants include:

  • Avita Medical
  • Integra LifeSciences
  • MiMedx Group
  • Organogenesis
  • Osiris Therapeutics
  • Vericel
  • Others

Financial Performance

ACell’s recent financial results can be summarized as follows:

  • Slight contraction in topline revenue
  • Reduced gross profit
  • Uneven operating losses and margin
  • Variable cash flow from or used in operations

Below are relevant financial results derived from the firm’s registration statement:


Source: Company registration statement

As of March 31, 2020, ACell had $4.6 million in cash and $22.3 million in total liabilities.

Free cash flow during the twelve months ended March 31, 2020, was negative ($1.4 million).

ACLL intends to sell five million shares of its common stock at a midpoint price of $15.00 per share for gross proceeds of approximately $75.0 million, not including the sale of customary underwriter options.

Certain existing shareholders have granted the underwriters an option to purchase 15% of the offering as the ‘greenshoe.’

Assuming a successful IPO at the midpoint of the proposed price range, the company’s enterprise value at IPO would approximate $368.7 million.

Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 22.05%.

Per the firm’s most recent regulatory filing, the firm plans to use the net proceeds as follows:

approximately $25.0 million to fund research, including clinical trials and post-market studies, and product development for our existing and pipeline products;

approximately $10.0 million to invest in commercial infrastructure, including growing our sales force, expanding our international opportunities and investing in continued enhancement in training, including professional education;

approximately $8.0 million to invest in upgrades to our Lafayette, Indiana facility; and

the remainder for working capital and general corporate purposes.

Management’s presentation of the company roadshow is available here.

Listed underwriters of the IPO are UBS Investment Bank, Barclays, RBC Capital Markets and SunTrust Robinson Humphrey.


ACell is seeking public investment for a variety of initiatives, including further product development as well as its continued commercialization efforts.

The company’s financials show the appearance of a ‘decline in procedure volumes in the second half of March 2020, driven by the impacts of the COVID-19 pandemic. However, in April 2020, as hospital access began to resume and restrictions on mobility began to lift in certain areas of the United States, we began to observe a gradual recovery in weekly procedure volumes.’

So the negative effects of the pandemic may be temporary; however, the definition of ‘temporary’ may change as a number of large states are now experiencing a resurgence in Covid19 cases, so the effects may continue to dampen results for some time.

Selling, G&A expenses as a percentage of total revenue jumped in the first quarter of 2020 and the firm’s Selling, G&A efficiency rate dropped to 0 as the pandemic affected operations.

The market opportunity for improved wound care solutions is significant and expected to grow at a moderate rate in the years ahead while the firm faces significant competition in the industry.

Management hopes to expand internationally to grow its addressable market although such expansion is likely to bring additional costs related to it.

UBS Investment Bank is the lead left underwriter and IPOs led by the firm over the last 12-month period have generated an average return of negative (75.4%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

As a comparable-based valuation, PolyPid (PYPD), which is in Phase 3 trials for its wound care matrix system, currently has a market capitalization of around $250 million.

ACell, with products in the marketplace and significant revenues and growth is proposing a market cap of $340 million and a Price/Sales multiple of 3.4x.

Compared to a basket of publicly held ‘Healthcare Products’ firms in the NYU Stern School dataset which indicated an EV/Sales multiple of 5.94x, ACLL’s proposed multiple of 3.4x appears reasonable.

Although the firm will likely continue to feel the effects of the Covid19 pandemic on its sales growth in 2020, those effects will likely be temporary. The IPO appears reasonably priced, so my opinion is BUY at up to $15.00 per share.

Expected IPO Pricing Date: July 16, 2020.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)


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